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Saudi Arabia sets minimum limit for public-private partnership projects

  • Saudi Arabia sets minimum limit for public-private partnership projects
  • The amended regulations of Saudi Arabia's Privatization Law outline key provisions for privatization projects.
  • Minimum limits are set for public-private partnership projects at SR 200 million (about $53.3 million), and for asset ownership transfers at SR 50 million (about $13.3 million).

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The amended executive regulations of Saudi Arabia's Privatization Law, published in the official gazette Umm Al-Qura, outline key provisions for privatization projects, informs the Saudi Gazzete. They set minimum limits for public-private partnership projects at SR 200 million (about $53.3 million), and for asset ownership transfers at SR 50 million (about $13.3 million).

The regulations were endorsed by the Board of Directors of the National Center for Privatization & PPP (NCP) in December 2023, and have been developed by integrating international practices and local experiences in privatization projects. They aim to enhance transparency and fairness while promoting the growth of the national economy by involving the private sector in various sectors.

The regulations replace previous guidelines and signify a significant step in Saudi Arabia's privatization program, aiming to improve service quality, efficiency, and reduce costs for individuals and companies while fostering economic development and providing opportunities for citizens.

Article three of the regulations outlines the minimum values for privatization projects, with specific criteria for determining these values. For the transfer of asset ownership projects, the minimum value is set at SR 50 million.

Meanwhile, for a public-private partnership project, the minimum limit is set at SR 200 million. This threshold is determined based on the projected total nominal value over the project's duration. This estimation considers various factors, ensuring that the minimum requirement is met in any of the following: (1) capital and operational expenditures, including government-owned assets for which the private sector is granted any rights including ownership transfer, if applicable; (2) potential financial obligations arising for the state treasury; (3) expected financial revenues that the government will receive. Multiple projects of similar nature in their scope and contractual structure may be combined by the executive entity to meet the specified minimum required under this article.

The regulations will be applicable to privatization projects either offered or contracted by companies established or owned by the government, with a direct or indirect ownership of more than 50 percent of their capital. These companies are established or owned with the intention of offering privatization projects.

In 2023, the NCP announced the launch of the Privatization & PPP (P&PPP) pipeline consisting of 200 approved projects in 17 sectors, including seven desalination projects starting in 2024. In addition, Independent Water Plant projects, Independent Sewage Treatment Plant projects and strategic water reservoir projects will be tendered in the coming years under different contract models.

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